Opinion
No. CV-03-0521210 S
December 1, 2004
MEMORANDUM OF DECISION
The plaintiff, Homer Scoville, owner of a shopping plaza in Middletown, Connecticut, has been involved in a series of actions to evict a tenant, Shop-Rite Supermarkets, Inc. (Shop-Rite) and two sub-tenants, F.P.T. Associates, LLC (FPT) and Washington Middle Three, LLC (WMT). One Frank P. Tornaquindici has a controlling interest in FPT, while Peter D'Addeo has an interest in WMT. In 1998, Scoville brought a declaratory judgment action to determine the rights of the tenant and sub-tenants to the leased premises. This matter concluded on November 7, 2001, with a tentative settlement. See Scoville v. Shop-Rite Supermarkets, Inc., Superior Court, judicial district of New Britain, Docket No. 9806-1688 (November 7, 2001, Berger, J.), transcript at 1. The settlement proved unsuccessful and Scoville then commenced eviction proceedings against the tenants. On March 20, 2003, the Superior Court dismissed the case; an appeal was filed which has been argued and is pending decision. Scoville v. Shop-Rite Supermarkets, Inc., Superior Court, judicial district of Middlesex, Docket No. 09-131305 (March 20, 2003, O'Keefe, J.) ( 34 Conn. L. Rptr. 344); on appeal, A.C. 24063.
During pre-trial discovery in these suits, Scoville apparently learned that a person or entity, other than a party to the lease, held a "veto" over potential lessees to whom WMT might sub-lease. This third party, known as "Doe" in the pleadings, apparently is advancing monthly payments to WMT for this veto privilege. Scoville also has observed that the premises subject to the lease are in disrepair and have not been operated as a store in the last seven years.
In the present action, Scoville seeks a "bill of discovery" to compel a deposition of Tornaquindici and D'Addeo. Scoville states that he intends to evaluate the information that he obtains through the bill of discovery and looks to bring a case based upon the following theories: 1. The actions of the tenants violate the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110b; 2. The tenants have intentionally interfered with his business relationships; 3. The tenants and Doe have violated the state anti-trust act; and 4. The tenants have not acted in good faith under the lease.
The court denied preliminary motions filed by FPT and WMT to dismiss the bill of discovery based on res judicata grounds and the settlement in the declaratory judgment matter. It conducted a hearing regarding the merits of the petition on October 19, 2004, where Scoville testified and exhibits were introduced by both parties.
Judge Scholl recently summarized the nature of a bill of discovery in Maheu v. Johnson Memorial Hospital, Inc., Superior Court, judicial district of Tolland at Rockville, Docket No. CV 044000370 S (September 17, 2004, Scholl, J.) ( 37 Conn. L. Rptr. 900). The judge first quotes with approval from the case of Berger v. Cuomo, 230 Conn. 1, 5-8 (1994): "The bill of discovery is an independent action in equity for discovery, and is designed to obtain evidence for use in an action other than the one in which discovery is sought . . . As a power to enforce discovery, the bill is within the inherent power of a court of equity that has been a procedural tool in use for centuries . . . the bill is well recognized and may be entertained notwithstanding the statutes and rules of court relative to discovery . . . Furthermore, because a pure bill of discovery is favored in equity, it should be granted unless there is some well founded objection against the exercise of the court's discretion . . . To sustain the bill, the petitioner must demonstrate that what he seeks to discover is material and necessary for proof of, or is needed to aid in proof of or in defense of, another action already brought or about to be brought . . . Although the petitioner must also show that he has no other adequate means of enforcing discovery of the desired material, the availability of other remedies . . . for obtaining information [does] not require the denial of the equitable relief . . . sought . . . This is because a remedy is adequate only if it is one which is specific and adapted to securing the relief sought conveniently, effectively and completely. The remedy is designed to give facility to proof. Discovery is confined to facts material to the plaintiff's cause of action and does not afford an open invitation to delve into the defendant's affairs . . . A plaintiff must be able to demonstrate good faith as well as probable cause that the information sought is both material and necessary to his action . . . A plaintiff should describe with such details as may be reasonably available the material he seeks . . . and should not be allowed to indulge a hope that a thorough ransacking of any information and material which the defendant may possess would turn up evidence helpful to his case . . . What is reasonably necessary and what the terms of the judgment require call for the exercise of the trial court's discretion . . . The plaintiff who brings a bill of discovery must demonstrate by detailed facts that there is probable cause to bring a potential cause of action. Probable cause is the knowledge of facts sufficient to justify a reasonable man in the belief that he has reasonable grounds for presenting an action . . . Its existence or nonexistence is determined by the court on the facts found . . . Moreover, the plaintiff who seeks discovery in equity must demonstrate more than a mere suspicion; he must also show that there is some describable sense of wrong. The plaintiff need not, however, state each claim with technical precision; he need only set forth facts that fairly indicate that he has some potential cause of action . . ."
The Maheu court also refers approvingly to Journal Publishing Co. v. Hartford Courant Co., 261 Conn. 673, 681-2 (2002), for the rule that "it is necessary for a plaintiff who brings a bill of discovery to demonstrate probable cause to bring a potential cause of action and whether the particular facts alleged constitute probable cause is a question of law."
In keeping with this precedent this court allowed Scoville to testify as to the facts that establish his right to obtain the bill of discovery, and the defendant-tenants were permitted to cross-examine him. This evidence indicates as follows:
1. Prior to Shop-Rite's closing in November 1997, Scoville, by acquiring the premises, assumed the existing lease of June 1, 1967, between the prior owner and Shop-Rite.
2. The lease has the following relevant provisions. In paragraph 4, the rent during the initial term of twenty years was set at $42,000 per year. Paragraph 5 allows for four five-year extensions of the lease, which, if each is taken, makes the last day of tenancy July 31, 2008.
Scoville claimed in the prior proceedings that the lease option to be taken in January 1998 (paragraph 5(c)) was improperly exercised by Shop-Rite. He argues that Shop-Rite has lost its tenancy. This is the matter now pending in the Appellate Court. Until that court rules, the lease terms continue to be binding on the parties.
3. Paragraph 5(e) of the lease requires that, during the extended lease terms, Shop-Rite pay to Scoville either the same yearly rental of $42,000 or "percentage rent," whichever is greater. To find the percentage rent, the paragraph requires that, after the allowance of certain credits and exclusions, an amount of gross revenue be determined, and that this figure be multiplied by "3/4 of 1%."
4. Paragraphs 11 and 12 of the lease cover the duties of Scoville and Shop-Rite to make repairs. Essentially Shop-Rite is to keep in repair the interior of the premises and Scoville is to maintain certain exterior and structural items.
5. The lease further provides in paragraph 17 that Shop-Rite may operate a supermarket and a drug store at the site, but while W.T. Grant also holds a tenancy in the shopping center, may not operate a department store. The tenancy may not be used for industrial purposes, a carry-out restaurant or any offensive purpose.
6. Paragraph 18 provides: "The Tenant may sublet all or any part of the demised premises or assign the Lease but the Tenant shall not thereby be relieved of any liability hereunder."
7. In November 1997, Shop-Rite terminated operations at the site for business reasons. The premises have been kept "dark" since that date.
8. Since closing its operations, Shop-Rite has continued to pay to Scoville the basic rent required by paragraph 4 of the lease. As there have been no gross sales, the percentage rent calculation has not been made.
9. In 1998, Shop-Rite sub-leased the premises to FPT, which in turn sub-let the premises to WMT. In its lease to WMT, FPT retained the right to enter into agreements with Scoville regarding the lease or the premises.
10. Scoville recently visited the site and found that the interior is blighted and in disrepair. A portion of the front of the site was being used as a Halloween costume shop. He states that he has received complaints from other tenants that they are affected by the vacancy of an anchor tenant and the blighted condition of the premises.
11. Scoville has had discussions with Peter D'Addeo, the controlling official with WMT, as to businesses that might rent the premises from WMT; to date, however, WMT has not rented the premises. Scoville has suggested that WMT operate a supermarket at the premises, but he has been rebuffed with the statement that such rental was not possible. Scoville also knows that the site has a less than adequate square-foot area for the opening of a modern grocery store.
12. Scoville has learned that WMT has a "joint development agreement" with another person or entity, whom he calls "Doe." Doe pays WMT the monthly sum of $22,700 to WMT, and Scoville claims that this payment is for the privilege of having a veto over any proposed tenants of WMT.
13. A deposition of Tornaquindici, FPT's chief executive, was held on October 16, 2001. This court had issued a protective order restricting the deponent from revealing Doe's name or furnishing a copy of the third-party agreement. The deponent denied knowing the details of the agreement, other than that it involved the monthly payment of $22,700 by Doe to D'Addeo. Tornaquindici stated that he did not receive any benefit from the agreement.
14. A deposition of D'Addeo was held on October 16, 2001, November 1, 2001, and November 5, 2001, under the same protective order. The deponent acknowledged that there was an agreement with Doe and that it was "a good deal." Transcript, November 1, 2001, page 67. D'Addeo also had an understanding with Tornaquindici that he would not open a grocery store at the site without Tornaquindici's permission. Finally the deponent acknowledged that there was a Waldbaums (AP) grocery store located across the street.
15. D'Addeo was asked (November 5th transcript at 40) if the real reason that there cannot be a grocery store at the premises was because Doe "would never agree to it." The deponent replied: "I don't know that they would never agree to it. I don't know that."
The court concludes that the facts as found do not meet the standard as set forth above which requires a showing of probable cause to bring a potential cause of action. First the proposed CUTPA claim is that the premises have not been promptly sub-leased or properly maintained by the tenants. It is unlikely that CUTPA may be used as a basis for this claim. See Arawana Mills Co. v. United Technologies Corp., 795 F.Sup. 1238, 1252, n. 14 (D.Conn. 1992) (CUTPA would not apply to actions of commercial tenant, as CUTPA covers the practices of landlords, not the lessee). Even if CUTPA did apply, Scoville would have difficulty demonstrating a violation of CUTPA on the failure of the tenants to sublease or maintain the property. This is a matter of insufficient gravity for CUTPA. Abbot v. Lakewood Management Associates, Superior Court, judicial district of New Haven at New Haven, Docket No. CVNH-8906-3256 (May 7, 1990, DeMayo, J.) (a CUTPA suit by tenant alleged that landlord delayed renovation of the premises; the court rejected the claim stating that "[e]very delay and every error and every minor neglect does not and should not be the basis for recourse to a CUTPA claim and its accompanying claim for counsel fees"); De La Concha v. Aetna Life Insurance Company, Superior Court, judicial district of Hartford at Hartford, Docket No. CV 98-0580129 (August 23, 2002, Satter, J.) ( 33 Conn. L. Rptr. 179) (landlord's refusing to enter into leases unless they were of short duration fails to state CUTPA claim). See also Downes-Patterson Corp. v. First National Supermarkets, Inc., 64 Conn.App. 417, 427 (2001) (if allegation of passive conduct is to violate CUTPA, there must be a duty alleged). Scoville does have his remedies against Shop-Rite and the subtenants under the lease if they fail to make repairs.
To the degree that Scoville claims that the "joint development agreement" violates CUTPA, the court discusses this matter under the antitrust claim.
Scoville sets forth as the proposed second claim that FPT and WMT have interfered with his business relationships. In order to prevail on this claim, Scoville must demonstrate that the claimed interference "resulting in injury to another is wrongful by some measure beyond the fact of the interference itself." Blake v. Levy, 191 Conn. 257, 262 (1983) (citation omitted). See also Heyman v. Kline, 344 F.Sup. 1110, 1115 (D.Conn. 1970) where the allegations concerned an employee who interfered with a plaintiff-landlord's tenants: "From the evidence adduced, it is abundantly clear that the actions of the defendant, in his dealings with the tenants of plaintiff's and other third parties, damaged the good will of plaintiffs' business affairs . . ."
The facts presented in court do not establish wilful interference. The subtenants have consistently paid the amount due each month as basic rent. The fact that Scoville has not received percentage rent is due solely to the lack of a functioning tenant; there is nothing in the lease requiring that the tenant maintain an on-going business at the site. Any claims for damages on behalf of other tenants is completely speculative on this record. Finally Scoville has not shown that WMT has acted wilfully in not sub-letting the space to another tenant.
The third proposed cause of action alleges a violation of the state antitrust act, General Statutes § 35-26 and a restraint of trade, based upon Doe's joint development agreement, the payments being made under the agreement and the restrictions therein on the type of business that may operate at the location. Scoville brands such restrictions as anti-competitive. But "[f]or the most part, restrictive covenants in shopping center leases have not been found to unreasonably restrain competition so as to render them unenforceable. On the contrary, these covenants have been found to be consistent with public interest." 7A P. Rohan, Current Leasing Law and Techniques § 6.14, citing Vermont Nat. Bank v. Chittenden Trust Co., 465 A.2d 284 (Vt. 1983).
Using this rule of reasonableness, Doe's joint development agreement is not anti-competitive. Under section 18 of its lease, Shop-Rite may freely sublet the lease; under section 17 of the lease, there are few restrictions on the tenant on use of the premises. Therefore WMT may agree to limit the use of the tenancy by means of an agreement with a third party. See Spanish Oaks, Inc. v. Hy-Vee, Inc., 655 N.W.2d 390 (Neb. 2003) (landlord's suit to block agreement between lessee and sub-lessee fails; there is no restraint of trade); Deer Cross Shopping Center, LLC v. Stop Shop Supermarket Company, 773 N.Y.S.2d 211 (Supreme Court, New York County, 2003) (court found no anti-trust violation in agreement giving tenant the exclusive right to operate supermarket even though successor tenant no longer operated supermarket at location). See also Elida, Inc. v. Harmor Realty Corporation, 177 Conn. 218 (1979); Mark-It Place Foods, Inc. v. New Plan Excel Realty Trust, Inc., 804 N.E.2d 979 (2004) (no restraint of trade because the agreement only applied to tenants within a particular shopping center, not rest of community).
The final proposed claim being advanced by Scoville is that the defendants have violated the duty of good faith and fair dealing present in every contract. But as the court in De La Concha, supra, points out, there must be an express provision in the contract to which the duty of good faith applies. See also Spanish Oaks, supra at 400: "The implied covenant of good faith is read into contracts in order to protect the express covenants or promises of the contract, not to protect some general public policy interest not directly tied to the contract's purpose."
Here Scoville has failed to set forth what provision of the lease the subtenants have violated without good faith. The contract allowed for a sub-lease and for almost unrestricted use by the sub-tenant. The tenant is paying rent as required by the lease. The court therefore concludes that Scoville has not established the probable cause needed to obtain a bill of discovery.
In addition, the court has quoted extensively above from prior decisions that indicate that the bill of discovery is equitable in nature. There are several reasons why equity does not require granting this bill of discovery. First the court has previously approved an order limiting discovery in the then-pending declaratory judgment matter. Pursuant to that order, discovery was undertaken on several dates of the two prospective deponents. Scoville thus already has an amount of material from which to decide whether to proceed against the defendants named in the bill of discovery. In addition, as indicated in finding of fact 15, above, Scoville has learned that Doe at least had a limited right to approve sub-tenants.
Scoville may seek the identity of Doe during the course of the civil suit and that court might allow such a disclosure in a protective order. As WMT points out in its brief of November 29, 2004, a trade secret may be appropriately protected. The trial court might require that the joint development agreement be tendered to it for in camera review.
Moreover Scoville has no standing to question the agreement between WMT and Doe. Scoville's situation is comparable to the plaintiff in Waterford Parkade, Inc. v. Picardi, Superior Court, judicial district of Hartford/New Britain at Hartford, Docket No. CV 94 0539883 S (March 11, 1996, Aurigemma, J.). There the court held that the developer of a shopping center had no standing to challenge an agreement reached between Stop and Shop, a business operating opposite from the proposed site and the landowner. The effect of the agreement was to preclude the developer from leasing to a competitor of Stop and Shop. The court held that the developer's damages were too speculative for the purposes of aggrievement in a claim of restraint of trade.
Finally, not only does Scoville have sufficient facts without the bill of discovery to evaluate whether to bring suit, he also has his rights under the lease. If the premises is not being maintained, then he should make repairs and charge them against the tenants. The bill of discovery is therefore denied. So ordered.
Henry S. Cohn, J.